Chart of the Week
Since the end of 2023, cocoa prices have skyrocketed. From USD 1,900 per tonne in March last year, the price recently hit an all-time high of USD 9,600, a spectacular increase of 427%.
The cocoa price surge comes in sharp contrast with wheat price trends over the past two years: following a rise of 56% in March 2022 prompted by Russia’s invasion of Ukraine, wheat prices have retraced by 44%.
OUR ANALYSIS
Several factors are behind the astounding rise in cocoa prices, including extreme weather conditions, rising production costs (energy, fertilisers and labour) and a strong increase in demand, particularly from Asia.
Ghana and Côte d’Ivoire, which produce almost two-thirds of the world’s cocoa, have been hammered by bad weather. Producers in West Africa have seen their harvests disrupted by unseasonal heavy rainfall followed by excessively dry spells. Yields have also been affected by crop diseases. The supply deficit and resulting price surge could have longer-term implications for certain food companies. Chocolate producers will attempt to limit any margin impact by passing on price increases to the consumer, adjusting product composition, or reducing product quantities.
When one of the world’s leading wheat producers, Ukraine, was invaded by Russia, the rise in wheat prices was much smaller than for cocoa. These fluctuations reflect the complex and volatile nature of commodities, which are exposed to a myriad of factors such as geopolitical rivalries, demand swings and, not least, climate change.
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Written on March 28, 2024. This is not an investment advice. Opinions subject to change.
See also: https://latribune.lazardfreresgestion.fr/en/japan-the-end-of-an-era/
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This document is not pre-contractual or contractual in nature. It is provided for information purposes. The analyses and descriptions contained in this document shall not be interpreted as being advice or recommendations on the part of Lazard Frères Gestion SAS. This document does not constitute an offer or invitation to purchase or sell, nor an encouragement to invest. This document is the intellectual property of Lazard Frères Gestion SAS. LAZARD FRERES GESTION – a simplified joint stock company with share capital of €14,487,500 – Paris Trade and Companies Registry No. 352 213 599. 25, RUE DE COURCELLES – 75008 PARIS, FRANCE
